In our mission to pin-down the perfect month-end financial close – one where account reconciliation is quick, easy and accurate – it is necessary to look at every aspect of the monthly close procedure. Our next stop is the approval process.
Most accounting teams use the ‘four-eyed’ principle for account preparation and reconciliation approval. That is, two separate individuals should be on it. One doing the reconciliation, and another one approving it. While this is a great idea in theory, in practice it is a little more difficult to manage. Let’s take a look at why…
Challenge 1: No standardisation of processes
One of the key reasons the approval process is often so chaotic, is that finance staff work independently, using their own processes and techniques. Working in silos like this means that there is no standardised process that all staff members follow. Trying to approve accounts prepared with another process, becomes rather difficult, so that becomes an extra obstacle to even think about it.
Challenge 2: No segregation of duties in Excel
Research shows that nearly 83% of finance departments still use Excel for reporting. While Excel is a useful all-round tool, it does not provide an easy way to segregate duties, such as the preparation and approval of account reconciliations.
Changes in Excel are not automatically tracked or logged – you won’t know if anyone has fiddled with the figures, shared spreadsheets can have changes saved over one another, and it is not immediately obvious as to when certain tasks have been completed. For 72.8% of finance departments, the upshot of using Excel is that only the manager checks and approves account reconciliation.
Challenge 3: The fundamental problem
When surveyed, 90% of finance staff said they were under pressure to complete the monthly close faster. What’s more, 77.8% of finance departments cannot close their books within the first three days and nearly half end up working overtime to get the books closed. These time pressures mean that only a random sample of accounts are checked, which does not bode well for the accuracy of the accounts. In fact, 72% of finance staff say they do not completely trust the figures in their final report.
As one respondent so aptly put it: ”The biggest challenge is to achieve a faster, more reliable close, and to make it efficient.”
Four-eyed demon challenges
- Flawed or non-existent approval process
- Binders need to be passed around in the organisation
- Unclear as to who should approve which account
- Difficult handling of rejections and revisions
- Difficult to get an overview of the process
Achieving a smarter month-end close
Adra Match’s balance sheet reconciliation software BALANCER provides an automated workflow for the month-end financial close. When you have finished preparing and reconciling an account you can mark it as ready for approval. An approver is then automatically notified to check and approve the account. Finally, your manager or CFO is alerted and provides final approval.
BALANCER incorporates a standardised preparation and approval process into the very tool you use, ensuring everyone is following the exact same procedure. Everything is clearly displayed through the dashboard – no need for confusing binders or obscure Excel documents.
Ready to vanquish the four-eyed approval demon from your midst once and for all? Discover the full range of benefits to BALANCER from Adra Match and request your free demo.
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Catch up with previous reconciliation challenges in our month-end reconciliation blog series:
- Taming the Excel account specification beast in the month-end close
- Stop the supporting documentation devil creating hell at month-end